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Active income is income for which solutions have been performed. This includes wages, tips, salaries, commissions, and income from businesses in which there is material participation. Passive or Residual income is an income obtained on a regular basis, with little effort needed to maintain it.
Portfolio income is income from investments, dividends, interest, royalties and capital gains. Portfolio income does not come from passive investments and is not earned through normal business activity. Normally, income from interest on money that has been loaned does not count as portfolio income.
Now, looking at the resources of residual income, we are going to move from the ones which we think are the toughest to create to the ones that are the easiest to produce. Here we go.
7. Royalties: the creation of music, books, inventions, machinesand patents. A royalty is something you've created or sold and place it on a platform that you do not run and then get compensation based on when the item is purchased or utilized. Most of us do not possess the potential to quickly create freshwater flows.
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This is the purest form of passive residual income, if you can achieve it. .
6. Network Marketing: Network marketing is a unique business model and has made more millionaires than any other business. The industry as a whole is growing and more companies are trying to leverage referrals or direct sales to increase revenue and promote solutions. On the other hand, the industry as a whole is confusing to most and requires a tremendous amount of mental and emotional fortitude to produce residual income potential.
The effort you must put in is important to consider. .
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5. Subscription Models: Subscription models/Customer Hubs/Member Areas All these are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own category. But it's considerable cost and you must continuously create and cultivate content and worth. The income is remaining and combines devotion and education with community.
A good book that explains this version of residual income is The Automatic Customer by John Warrillow. He walks you through, in plain English, the various styles of subscription versions and the way to potentially apply them to your business.
4. Affiliate marketing: Getting paid to tell folks what you enjoy and showing them where to get it. As a Dad, I tried 3 large seats prior to finding the Bumbo. Now when I blog about the Bumbo and link to it for my Amazon account, and someone buys it, I can earn a commission.
A great example of this is Pat Flynn in PassiveIncome.com as he walks through how to set up your own method to maximize and profit from your passion.
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3. Business: As I mentioned, not all businesses are created equal when it comes check my site to residual income. Lets have a peek at a local taco stand. Surethat taco stand might have loyal patrons and also make the best damn steak taco youve ever needed, but they also need to wake up every day and turn the lights on and fire up the grill to get paid for their particular tacos.
So, literally I am going to earn a fee whether I go in or not. Sure, I have to maintain relationships to keep earning that fee, but really the income is residual because once I sign up one client I am going to earn money from their money perpetually.
Why do we call these the Power 2 Because these require less specialization and expertise, and together with the leveraged use of smart debt, can operate together.
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2. Real Estate: Property is 2 for one reason, leverage using smart debt and other peoples money. When looking at property rents and the potential for income property provides, it is the trifecta of residual income. First, a home or rental property can enjoy, therefore capital appreciation is the first long-term benefit of owning a home.
Other people are paying the mortgage, insurance, property taxes and maintenance at the same time you own that piece of find more property. Third, taxation protection. Rental income is taxed at a lower rate than ordinary income and you also can depreciate property by taking a paper deduction on your annual tax return not to mention expensing the cost of mileage, mortgage interest, and updates to the home.
The fourth and maybe most hidden, but important benefit is that over time rents rise, protecting your cash-flow against inflation, although your mortgage interest can be at a fixed rate potentially. .
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1. The final and most effective form of residual income, in my opinion, is investing and insurance. The majority of us have 401Ks and IRAs, therefore that I am going to leave that for the investment side. Within that, I think our Foundation Freedom Phases is by far the easiest, safest and most powerful tool for several reasons: a.